'IRFAN SAADAT KHAN, J.--- The instant petition has been filed with the following prayer:- "It is, therefore, prayed that this Hon'ble Court may be pleased to kindly admit the petition and after hearing the parties declare that the order passed by the respondent levying additional stamp duty and penalty conveyed to the petitioner under letter/order Annex. 'H is without lawful authority and of no legal effect. To restrain/prohibit the respondent, his sub-ordinates and any person acting on his behalf and under him from taking any action for the recovery of the additional Stamp duty and the amount of penalty; III. Full cost of the petition. IV. Any other relief which this Hon'ble Court may deem fit and proper be also granted to the petitioner. "
2. Briefly stated, the facts of the case are that the petitioners are a private limited company and had obtained on lease vide lease deed dated 21st October 1998 one bungalow constructed on Plot No,B-11, KDA Scheme No,1, Karachi, for their directors, namely, Muhammad Saeed Fikree, Moin Fikree and Nadeem Fikree for a period of four years as per the following terms:- "(a) Monthly rent at Rs,102,000/- (rupees one hundred and two thousand) from 1st March, 1998 to 29th February, 2000.
(b) monthly rent at Rs,132,000/- (rupees one hundred and thirty two thousand) from 1st March, 2000 to 28th February, 2002.
3 Thereafter, on 15.11.1999 the Inspector of Stamps, Board of Revenue, Government of Sindh, inspected certain documents of the petitioner company and furnished his inspection report dated 20.11.1999 holding that the petitioners have not paid proper stamp duty on the lease deed dated 21.10.1998 as per Article 35(c)(i) of the Stamp Act, 1899 (the Act),. Hence a deficiency of Rs,1,10,160/- was detected and the petitioners were required to pay the said amount otherwise appropriate action as provided under Section 33 of the Act would be initiated against .Them. The petitioners thereafter furnished a reply vide letter dated 25.1.2000 to the said inspectipn mentioning therein that since the interpretation placed by the respondent was incorrect as according to the petitioners their case falls under. Article 35(a)(iii) of the Act and not under Article 35(c) of the Act, hence they were required to drop the proceedings initiated against the petitioners. The petitioners also approached the Deputy Chief Inspector of Stamps by filing a comprehensive letter dated 28th May 2000, stating therein that their case falls under Article 35(a)(iii) and not Article 35(c) of the Act hence the demand of deficient amount by the Inspector Stamps is uncalled for and may be vacated. The Deputy Chief Inspector of Stamps after considering the letter of the petitioners passed order dated 19th September 2000 under Section 40(1)(b) of the Act mentioning therein that the interpretation of the department/respondent with regard to the applicability of Article 35(c) of the Act is correct hence the petitioners were required to pay an amount of Rs,2,20,320/- being the deficit stamp duty as well as 100% penalty on the deficient amount and were required to pay the said amount within fifteen days from the receipt of the said order. It is against this order that the present petition was filed.
4. Mr. Saadat Yar Khan Advocate has appeared on behalf of the petitioners and submitted that the interpretation placed by the department/respondent is erroneous as according to him the case of the petitioners falls under Article 35(a)(iii) of the Act and not under Article 35(c)(i) of the Act. The learned counsel then read out both the provisions of the law, which are available at page 47 of the file, and also read out clauses of the rent agreement to demonstrate that the case of the petitioners falls under Article 35(a)(iii) and not Article 35(c)(i) of the Act. During the course of argument he has also placed on record a letter dated 4th June 2002 mentioning therein that a legal opinion was sought by the respondent from the Law Department and in the said letter the Law Department has endorsed that for the purposes of Stamp Duty 'Clause (a) of Article 35 of the Schedule to the Stamp Act, 1899, is applicable. In the said opinion of the Law Department reliance was placed on the decision given in the case of Citibank v. District Registrar District Collector/Deputy Commissioner, Lahore and another (1999 M LD 1101). The learned counsel submitted that this legal opinion was obtained by the petitioners through their own sources and the same has not been produced by the respondent for the obvious reasons known to them. He stated that respondent was in full knowledge of the said legal opinion and still is insisting that under the given circumstances the provisions of clause (c) of Article 35 of the Act would be applicable, which according to him amounts to concealing a valid fact from this Court. He, therefore, submitted that this petition may be allowed by directing the respondent to impose/charge the stamp duty on the lease deed dated 21st October 1998 as per clause (a)(iii) of Article 35 and not clause (c) of Article 35 of the Act.
5. Mr. Ali Zardari, learned Assistant Advocate General Sindh, has appeared on behalf of the respondent and stated that the legal opinion of the Law Department is not binding upon the respondent and the interpretation of the above clauses made by the respondent according to him is correct and the petitioners are liable to pay the stamp duty on the lease deed as per provisions of clause (c) of Article 35 of the Act. He, therefore, submitted that this petition being meritless may be dismissed by imposing cost upon the petitioners.
6. We have heard both the learned counsel for the parties at considerable length and have also perused the record.
7. Before proceeding further we would like to reproduce hereinbelow the relevant provisions of the law for ready reference:- "ARTICLE 35(a)(Iii)--- Where the lease purports to be for a term in excess of three years, but not more than 20 years---The same duly is leviable on a debenture (No,27(b) for a consideration equal to the amount or of the average annual rent reserved.
'ARTICLE 35(c)--- where the lease is granted for money advanced in addition to rent reserved--- The same duty as is leviable on a Conveyance (No,23) for a consideration equal to the amount of advance as set forth in the lease, in addition to the duty which would have been payable on such lease, if no advance had been paid or delivered; provided that, in any case when an agreement to lease is stamped with the ad valorem stamp required for a lease and a lease in pursuance of such agreement subsequently executed, the duty on such lease shall not exceed four rupees."
'The only controversy involved in the instant petition is with regard to whether under the given circumstances the petitioner is liable to pay stamp duty as per Article 35(a)(iii) or Article 35(c) of the Act. Perusal of Article 35(c) of the Act ibid reveals that it is applicable where lease is granted for money advance in addition to rent reserved, meaning thereby that the stamp duty is payable on the money advance in addition to rent reserved. As per the interpretation of the respondent the money which was advance in nature was in fact advance rent. Perusal of the lease deed dated 21.10.1998 clearly reveals that there is no mention of any advance rent but the same talks about the monthly payment of rent i.e, from 1st *March, 1998 to 29th February 2000 at the rate of Rs,1,02,000/- and from 1st March, 2000 to 28th February, 2002 at the rate of Rs, 1,32,000/- p.m. It is strange to note that from where the respondent has come to the conclusion that clause 35(c) of the Act is applicable in the instant case whereas this Article clearly speaks of payment of stamp duty on "money advance in addition to rent reserved" which clearly denotes advance rent whereas Article 35(a)(iii) ibid clearly talks about payment of stamp duty on a "consideration equal to the amount of average annual rent reserved" which in our view means charging of stamp duty on "the average rent reserved" and not on "advance rent" misinterpreted by the respondent. To further elaborate the issue under discussion it is seen that in the decision upon which reliance was placed by the Law Department that of Citi Bank in the said judgment a Single Judge of Lahore High Court has placed reliance on a Full Bench's Judgment of Indian High Court reported as Union of India v. M/s. Caltex India Limited (AIR 1966 Punjab 488) wherein the said bench has dilated upon the issue that whether in the circumstances mentioned in the said judgment Article 35(b)(iii) or 35(c) of the Schedule (1) would be applicable. As per the said judgment of Indian High Court it was observed as under: "In this case the instrument of demise fixed the monthly rent. The lessee is required to pay Rs,25,500 on account of rent for thirty-six months. This liability of the lessee is,. Therefore, to pay rent and not advance in addition to rent reserved. An amount for which there is both a liability and a covenant to pay as rent cannot be termed as advance. It cannot in the circumstances be said that this is a case of granting a lease for money advanced in addition to rent reserved. The legal character of Rs,25,500 is rent and merely because that rent is paid in advance under a covenant its character does not change."
8. We were able to lay our hands on a judgment in Re: Chief .Controller Revenue Authority (AIR 1952 Bombay 285) wherein a Full bench Bombay High Court was of the view that rent reserved is not to be confused with advance rent as both these phrases denote different categories and while interpreting the provisions of Stamp Act intention of the law is to' be seen wherein a clear distinction has been drawn with regard to "rent reserved" and "advance rent". In the said judgment the Full bench of Bombay High Court observed "under the given circumstances of the case the rent reserved as per the lease can only mean rent in respect of which there is covenant on the part of the lessee to -pay amount mentioned and stated in the document". In the present case it is an admitted position that there is no mention whatsoever about any advance rent rather in the lease agreement, it has clearly been mentioned that premises was given on lease for a term of four years "yielding and paying" to the lessor monthly rent payable in advance on or before the 10th of each calendar month, meaning thereby that there was no payment of any advance rent.
9. The learned A.A.G while arguing the matter has also candidly conceded that there is no mention about payment of any advance rent in the lease agreement, hence how come the respondent has opined that provisions of Article 35(c) are applicable under the given circumstances which, as stated above clearly talks about "money advance in addition to rent reserved" is not understandable; whereas in the instant case it is tvident from the record that no money is paid in advance in addition to -the rent reserved has been paid. Hence the interpretatiOn of the relevant provisions of the Act by the respondent appears to be erroneous. In another case (AIR 1961 Punjab 12) it was held by a learned Single Judge of Punjab High Court that for rent paid in advance it would fall under Article 35(c) and not 35(a)(ii). We therefore in light of what has been stated above have come to the conclusion that the interpretation of department, so far as this' petition is concerned, is incorrect and in our view Article 35(a)(iii) would be applicable in the present case rather than 35(c). The petitioner is; therefore, liable to pay stamp duty in accordance with Article 35(a)(iii) and not as per Article 35(c) of the Act.
10. We would also like to observe that as per Article 35(a)(iii) it is A the average annual rent reserved that has to be made the basis for charging stamp duty, since the agreement was for four years i.e, for first two years rent was Rs, 1,02,000/- p.m. And for the next two years it was Rs,1,32,000/- p.m. Hence, in our view average of four years annual rent comes to Rs,14,04,000/- which should be made the basis for charging the stamp duty. We, therefore, direct the respondent to make a fresh working by calculating stamp duty equal to the amount of average annual IA reserved rent for all four years i.e, Rs, 14,04,000/- and to issue a fresh I treasury challan to the petitioner without charging penalty within 15 days of the receipt of this order and the petitioner is directed to make payment of the said newly worked out amount within 15 days of the receipt of the treasury challan.
11. Needless to state that if the petitioner fails to pay the newly worked out amount within the stipulated period, the respondent would be at liberty to impose penalty and to take appropriate action in accordance with law against the petitioner for the recovery of stamp duty. Petition stands allowed in the above terms along with the listed application.
Above are the reasons of our short order whereby we have j3 .Allowed this petition.